Japan Solar Investing

Japan Ready to Boost Solar Sector

Solar power firms are making the bet that the Fukushima disaster in Japan last year will be a game changer for renewable energy in Japan.

As reported by Reuters, the Japanese government is helping support this thinking by rolling out a very sizable subsidy for renewable energy by way of a feed-in tariff (FIT). Renewables still only account for around 1% of generated energy in Japan but that number is expected to jump very soon.

The plan the FIT mandates is that utilities buy electricity generated by renewable sources like solar, wind and geothermal at a premium for 20 years. Because of this system, which was enacted last summer, Japan’s Yano Research Institute expects the nation’s solar sector to balloon up to $18.9 billion.

While there is a risk of creating a bubble, the benefits outweigh the negative. According to vice president of Canadian Solar Japan Yu Kaname, “FIT is going to create a bubble without a doubt. That always happens with these kinds of schemes, but it will really kick off solar (in Japan).”

The purchase price of solar-generated electricity is expected to be set around 42 yen per kWh, which is higher than the 15 yen per kWh for industrial consumers and 25 yen residential users pay. However, FIT will change this and allow for “grid parity” to occur. Kaname stated, “We are almost at grid parity here. Think of what would happen if Japan allows things to run their natural course and solar reaches grid parity. We will be playing with the big boys.”

Because of this new system about to be put into play, foreign solar companies are salivating for a chance to enter the Japanese market. According to Suntech Power’s president of its Japan unit Yutaka Yamamoto, “The market is finally moving now that the FIT has been set, and we are being bombarded by inquiries…foreign firms will now be able to fight on an equal footing in the non-residential solar panel market, which is the area that will see the fastest growth.”

Solar panel sales rose by 30% in 2011 from 2010 with total generation topping 1 GW for the first time ever. With the FIT, total generation could be 2.5 GW by 2013. Combined with the fact that all 50 of Japan’s nuclear reactors are shut down, solar can make its power play right now.

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